White House in Spotlight… Again

It has been another turbulent week in the oil and tanker markets. Whilst U.S. tariffs on Canada and Mexico were postponed for a month, the 10% tariff on all Chinese products took effect on February 4, with Beijing swiftly retaliating, imposing a 10% tariff on U.S. crude exports and a 15% duty on LNG and coal exports starting February 10, whilst some other measures were also implemented. Later in the week, the market saw another executive order in which President Trump directed the imposition of “maximum economic pressure” on Iran, with the OFAC promptly releasing fresh sanctions, containing a list of individuals, companies and five tankers.

It remains to be seen whether a final deal with Canada and Mexico will be reached, but there is a lot at stake for the tanker markets. Canada exported over 4mbd of crude and 0.55 mbd of clean products to the US in 2024, while Mexico’s exports averaged 580 kbd of crude and 130 kbd of dirty products. If tariffs go ahead, with potential retaliatory actions likely in this scenario, tanker tonne mile demand growth and the potential drop in landlocked US refining runs are to be expected. For now, however, the uncertainty could prompt Mexico and Canada to diversify their crude exports, targeting Asian and European importers, with the Trans Mountain pipeline already looking at further expansion projects in the short and long term that could add up to 300 kbd of capacity to the TMX line.

The current standoff between the U.S. and China will have a limited direct impact on crude trade. China imported just 200 kbd from the U.S. last year and may seek to replace U.S. barrels with similar grades from West Africa, facilitated by the upcoming European maintenance season and the scheduled permanent closure of refining capacity. Yet, the bigger picture here is an extended trade war, with notable negative economic consequences both for the US and China.

While Trump’s directive to apply maximum pressure on Iran is likely still a work-in-progress, if actions succeed in reducing Iran’s crude exports to levels seen during his first presidency (estimated at around 400 kbd in 2020 compared to 1.6 mbd in 2024), it could provide another boost to the mainstream VLCC market, if China plays ball. A substantial portion of the dark/sanctioned fleet is at risk of being left unemployed, while China will also need to replace Iranian barrels from the non-sanctioned market.

President Trump’s latest declaration that the U.S. could “take over” the Gaza Strip and permanently displace its Palestinian population was immediately criticized in the Middle East. At this stage, the implications are unclear, with the impact on the Israel-Gaza ceasefire being the most critical factor. For tankers nothing has changed though, at least for now. Some companies are keen to resume transits, but firms remain cautious, monitoring shipping conditions and competitors. The potential resumption of Red Sea transits would only have a marginal impact on the crude tanker market. The biggest decline would likely be seen in Middle East VLCC trade to Europe, with more barrels being shipped on Suezmaxes via the Suez Canal. However, the anticipated decline in VLCC trade out of the Middle East could be more than offset by corresponding increases in crude trade to Asia. Suezmaxes could actually benefit modestly from a rising share of AG/Europe trade despite routing via the Suez. An element of support here could also come, if we see a substantial rebound in CPC shipments to Asia.

The impact on clean tankers is different. LR2 demand is the most vulnerable to the resumption of Red Sea transit, as approximately 62% of all barrels shipped in 2024 from the Midddle East Gulf/WCI to Europe were carried by this asset class and another 18% by cleaned-up Suezmaxes and VLCCs. The anticipated growth in Middle Eastern clean trade to Asia will aid the market; yet even assuming a net gain of around 200 kbd in AG-East trade this year, net LR2 demand could still decline by approximately 12% on an annualized basis if Red Sea traffic resumes.

With all this in mind, uncertainty remains the key factor in the tanker market, with a lot in the making that can significantly alter market dynamics. For now, though, the unclear path ahead is still offering a short-term upside risk to freight.

MidEast Gulf/India to Europe Clean Trade (kbd)

Crude Oil

East

A quiet week in the AG for VLCCs has taken its toll and rates have begun to soften, as the latter part of the last decade looks reasonably comfortable for charterers. Owners are hoping this is just a temporary setback and further activity next week will halt any further slide. However, with rates softening in the Atlantic the overall sentiment is bearish but needs a fresh test to establish which way it’s going to go. Today we are calling AG/China WS67.5 and AG/USG WS36.

The AG market hasn’t seen the same improvement we have seen in the East just yet, though we may see some next week as those from the East start to ballast. Today for Basrah/UKCM we estimate rates to be around 140 x WS62.5 level via C/C for modern approved tonnage. For East runs, there are still a few early ships keen and probably follow last-done for prompt dates. Though on the natural window, expect owners to be looking to push above 130 x WS110 next week.

Aframax rates in the East are steady this week sitting at 130 x WS140-145 level. Inquiry levels have remained steady throughout the week and we expect this to continue into next week.

West Africa

It’s has been a disappointing week for VLCCs in WAF with limited activity which has begun to put pressure on current freight levels. Owners have been resisting attempts by charterers to cover at below last done but it looks inevitable that they will have to take a hit as adjacent markets begin to tumble downwards. Tonnage availability looks favourable for charterers as we head into the March programme and next week could be a challenging environment for owners. Today we are calling WAF/East in the region of WS68.5.

Suezmax markets in West Africa are firm. We have seen activity fall today but there was steady enquiry earlier and it seems likely that charterers will hold back for now to avoid adding fuel to the fire. For a TD20 run next week, owners are still feeling bullish but we think 130 x WS95 should probably be repeatable. 

Mediterranean

Med enquiry has been steady but not quite up to that of the Atlantic basin. On TD6 today owners will be looking to push above WS102.5 and with limited firm itineraries in the East Med they seem likely to get their way. Rates for an East run have also firmed with lots of ships being fixed with South Korea options in the last week. Libya/Ningbo today is firm, and owners will be looking to push above $5M.

In Aframax markets in the Med, collective activity over the past fortnight finally made its mark on freight levels during the latter stages of the week. That said, owners can now at least boast a slight pickup in freight levels come time of writing.  Spurred on through replacement activity and compounded through restricted cargoes, the market reacted progressively with highs being set of WS132.5 for a benchmark Ceyhan, and up to WS137.5 for a stem where a particular set of restrictions were being considered. The cargo base has been covered, though uncertainty remains in terms of directionality. As ever, fixing date progression will open the lists again and although Suezmaxes for once aren’t an immediate concern, swooping in on part cargoes, surrounding markets such as the US and the UKC are yet to lend support to the Med. 

US Gulf/Latin America

USG VLCC export rates are beginning to nosedive from the strong levels we witnessed at the beginning of the week as a plethora of failed fixtures puts owners on the back foot. Fresh enquiry also slowed down as charterers are less inclined to rush in to cover remaining March stems. Brazil export had a mixed week as tonnage remains tight for earlier stems, but it looks like it may go in the same direction as other areas, though we also need a fresh test here.  Today we are calling USG/China $8.8m & Brazil/China WS66.

Local Aframax market pushed sideways through the week. Minimal spot fixing was reported as it’s likely most deals were done on a simple last done basis in a matter of a couple phone calls.  The list maintains prompt tonnage, carrying the same trend into next week.

North Sea

The state of the Aframax market in North Sea has plateaued and a hard floor is being realised, though not through supply and demand fundamentals, rather through owners dogged resilience to hold onto last done. That said, those opting to stay and operate in the region are benefitting from a fair few players being drawn down to the Med and others to the States side of the pond. This market needs some stimulation from either a surrounding sector or a boost in demand before any volatility can be expected.

Crude Tanker Spot Rates (WS)

Clean Products

East

Negative corrections seen on both LR1s and LR2s in the East this week. Although more action was seen, the building tonnages list saw charterers able to apply pressure and ensure less than last done was achieved. However, as the week ends the market sits flat and for now rates should hold fast. TC1 at the 75 x WS100 levels and UKC at $3.3m. TC5 steady at 55 x WS120, and UKC at the $2.45m mark. Owners will take some light in the number of off market fixtures and will hope that come Monday the lists will look stronger.

MRs east of Suez have seen steadier conditions with cargo flow keeping the top of the list ticking over to a point where charterers have reached forward on dates to secure tonnage. As such sentiment has driven a slight firming with an additional 5 points seen on TC17, however, a slower pace to the end of the week has stalled any further movement. Going in to next week owners in the region will be looking for cargoes to flow early on to maintain current sentiment.

UK Continent

In the MR market on Monday several cargoes were rolled and with DT tariffs imminent on Mexico/Canada this created a fast increase in TA cargoes, a 50+ point jump on TC2 and huge optimism for owners, until an extension was granted by the US and an onslaught of failures ensued. The market swung up to 37 x WS205/210 TA to now a mere 37 x WS165 with the impression less and less can be done with every new deal. Sentiment is soft.

All in all, it has been a positive week for Handies in the North as levels have traded up by 40 points for TC23 week on week. A main factor for this was the tariff hype from Trump at the start of the week which enabled Handy owners to ride the coattails of the bullish MR sector. There has also been limited supply available on the front end of the tonnage due a healthy number of ships being uncertain. Weekend break should relieve some pressure and further supply be replenished but keep an eye out for the soft MR sector which feels due for a hefty downwards correction.

Med 

It’s been a busy week for the Handies here in the Mediterranean which has seen rates firm up throughout. We began the week with XMed trading at 30 x WS160 but with increased enquiry the list tightened. By midweek we saw a split in levels with EMed paying a touch more than WMed due to weather related delays. Fast-forward to the present and we now see 30 x WS200 being repeated for XMed. Heading into the weekend not a great deal remains outstanding with charterers looking to slow owners’ momentum but given the state of the list owners will remain bullish come Monday. 

Finally, to the Med MR market where it’s been an active week with plenty of fixing action and rates initially firming off the back of a busy TC2 market. 37 x WS125 was last done Med/TA on Friday but the Med soon jumped and followed suit with 37 x WS180 being achieved. These levels were repeated for vanilla runs with 10 points more also put on subs for Nap suitability, but the overall feeling is that this market could face some pressure next week. With US tariffs put back a month TC2 has started to soften and at the time of writing we see the equivalent of 37 x WS160 on subs for Med/TA. Negativity to come here with nothing outstanding into the weekend.

Clean Tanker Spot Rates (WS)

Dirty Products

Handy

Handies in the North have seen little enquiry this week and it feels like two steps forward and one step back for this sector. The list was left tight and levels poised to firm following last week’s clear out of tonnage. Unfortunately for owners, cargoes failed to hit the market leaving freight sitting at 30 x WS165. Should replenishment fall in charterers favour, levels could be under pressure early next week if there is not the activity to match.

It has been a different story in the Med as activity continued to clear units from an already trimmed list, creating upward pressure and firming levels. The week started strong with early enquiry covering Xmed cargoes at 30xWS132.5. As the list tightened, cargoes continued to flow, and under-the-radar deals quickly firmed up rates here with 30 x WS150 reported on subs by the end of the week. Well-approved tonnage is limited as we head into the week, owners feel bullish and charterers will be hoping that replenishment is plentiful.

MR

Much like the Handies, north MR owners have seen little by way of enquiry leaving rates at 45 x WS120 and sentiment steady for now. A couple of well-approved and naturally positioned units are available for the next fixing window perhaps applying some pressure to rates early into next week.

Owners in the Med will be pleased to see levels on the rise as activity clipped units away from the list. Levels started the week with 45 x WS110 fixed for an Xmed run before the list tightened leaving charterers to look for forward cover, resulting in a 10-point increase in rates. Levels now sit at 45 x WS120 for Xmed and heading into next week, owners are hoping for more of the same.

Panamax

Tonnage on this side of the pond is scarce leaving charterers to consider alternative-sized vessels should enquiry surface. Levels still need a fresh test but ideas for UKC-USG voyages still sit at the 55 x WS110-115 mark despite Aframaxes pro-rating at 55 x WS109 for the same run. Over in the USG/Caribs, activity has seen tonnage clipped from the list leaving owners in a better position and steadying up sentiment. Owners will need to see this continue if levels are to bounce back.

Dirty Product Tanker Spot Rates (WS)

Rates & Bunkers

Clean and Dirty Tanker Spot Market Developments – Spot WS and $/day TCE (a)

wk on wk changeFeb 7thJan 30thLast Month*FFA Q4
TD3C VLCC AG-China WS768607764
TD3C VLCC AG-China TCE $/day9,75049,00039,25059,50040,000
TD20 Suezmax WAF-UKC WS1394818688
TD20 Suezmax WAF-UKC TCE $/day8,75035,50026,75030,25028,750
TD25 Aframax USG-UKC WS4133129136137
TD25 Aframax USG-UKC TCE $/day1,25027,75026,50027,75024,750
TC1 LR2 AG-Japan WS-24102126174 
TC1 LR2 AG-Japan TCE $/day-8,25018,25026,50041,750
TC18 MR USG-Brazil WS-5162168202177
TC18 MR USG-Brazil TCE $/day-1,00017,25018,25024,00018,000
TC5 LR1 AG-Japan WS-3121124175133
TC5 LR1 AG-Japan TCE $/day-25015,25015,50028,00016,250
TC7 MR Singapore-EC Aus WS3171168178173
TC7 MR Singapore-EC Aus TCE $/day75016,50015,75017,00016,000

(a) based on round voyage economics at ‘market’ speed, eco, non-scrubber basis

Bunker Prices ($/tonne)

wk on wk changeFeb 7thJan 30thLast Month*
Rotterdam VLSFO  -5539544547
Fujairah VLSFO  -11558569590
Singapore VLSFO  -19567586598
Rotterdam LSMGO  -8652660706

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